by People having bad luck when trying to think A couple of years ago Andrew Lilico wrote an article in The Telegraph arguing that good economists almost always are — mirabile dictu — right: Lord Turner wrote two reports creating important government policies based on his claim that people are often irrational — his pension review of 2005 and his report on the financial crisis in 2009. Indeed, in his famous Turner Review of the financial crisis as chairman of the FSA he claimed to be able to demonstrate the failure of almost the entirety of finance theory as it had developed since the 1950s, albeit without feeling the need to name-check the great men who had produced that theory or consider how they might have defended their ideas. But rationality is not an
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People having bad luck when trying to think
A couple of years ago Andrew Lilico wrote an article in The Telegraph arguing that good economists almost always are — mirabile dictu — right:
Lord Turner wrote two reports creating important government policies based on his claim that people are often irrational — his pension review of 2005 and his report on the financial crisis in 2009. Indeed, in his famous Turner Review of the financial crisis as chairman of the FSA he claimed to be able to demonstrate the failure of almost the entirety of finance theory as it had developed since the 1950s, albeit without feeling the need to name-check the great men who had produced that theory or consider how they might have defended their ideas.
But rationality is not an assumption of orthodox economic theory in that sense. Instead, it is what is called an “axiom”. No behaviour can prove that people aren’t, in fact, rational, because for an orthodox economist the only kind of explanation of any behaviour that counts as an economic explanation is an explanation that makes sense of that behaviour — that shows why the behaviour is rational.
Wooh! Who would have thought anything like that? Build your science on whatever foolish axioms you like — and since they are axioms no one can really criticize them and show that you are wrong.
Impressive indeed …